Property appraisals are a way to value a particular piece of real property during buying, selling, taxation, or exchanges of property. Appraisals are used during each of these processes and also during mortgage and lending transactions.
Property appraisals can be cumbersome, time-consuming, and inaccurate. Property appraisers typically appraise one property at a time, rather than multiple properties. A property appraisal may take 5-10 days, because an appraiser usually visits the property personally to measure its value. Alternatively, the property may not be physically inspected, which can make the appraisal inaccurate. Property values vary based on supply and demand as well as physical characteristics such as size, amenities, parking, view, and condition. As such, value has typically been measured by an appraiser's individual opinion after conducting, property specific research. Research time delays the customer's buying or selling process. Also, the opinion of an individual appraiser can be influenced by those involved in fraudulent financing schemes. Attempts have been made to deal with the long delay in receiving an appraisal using AVMs (Automated Valuation Models) and BPOs (Broker Price Opinions). While these tools do shorten the lag between the appraisal request and appraisal delivery, accuracy is compromised in both cases. It is rare that these appraisals include a visual inspection or photograph on the property in question. The lack of a photograph as well as lender pressure can substantially increase the possibly of fraud, which GSEs (Government Sponsored Entities) such as Freddie Mac™ and Fannie Mae™ are most concerned with when guaranteeing loans. It could be that as many as one-third of AVMs and BPOs are not used due to inaccurate values. Automated. Valuation Models (AVMs) have attempted to Value individual properties through pure statistical analysis or by updating the last selling price based on a time index. Property appraisals typically only include recent, sales, so that a complete analysis of all sales is not considered during the valuation of property value. To avoid another savings and loan crisis, the United States Government may pressure lenders to revalue each mortgage where collateral is perceived to have fallen. Also, the closing period on residential properties in the United States has traditionally taken 60-120 days; however, there is growing acceptance of a 1-5 day closing period. This trend highlights the desire for appraisals to be delivered on very short notice without compromising accuracy.
It is desirable to analyze all sales to measure a property's value, rather than only the recent sales (e.g., three or four of the highest priced or most recent sales). It would be desirable to have an appraisal system that accurately reflects individual property differences and monitors the ever changing value of each property in advance of a particular transaction. By recording property differences and measuring value in advance of a transaction, the appraiser can work without pressure to meet a particular value estimate and the client requiring an appraisal does riot have to wait for the research.